IMF Completes Second Review of Guyana's PerformanceUnder the PRGF Arrangement, Approves Disbursement of US$8.8 Million

The Executive Board of the International Monetary Fund (IMF) has completed the second review of Guyana's economic performance under its SDR 54.55 million (about US$73 million) Poverty Reduction and Growth Facility (PRGF) arrangement, (see Press Releases No.02/42 and No.03/152). This decision entitles Guyana to the release of a further SDR 5.97 million (about US$8.8 million) under the arrangement.

The Executive Board also approved Guyana's request for waivers on the non-observance of the end-December 2003 quantitative performance criteria on the net foreign assets of the Bank of Guyana, and three end-December 2003 structural performance criteria.

Following the Executive Board's discussion of Guyana on July 26, 2004, Takatoshi Kato, Deputy Managing Director and Acting Chair, said:

"Guyana's macroeconomic performance has been broadly in line with program expectations, despite a difficult security and political situation and wage pressures. Important progress has been made in advancing key structural reforms in the fiscal, governance, and public enterprise areas. Nevertheless, growth has remained weak, reflecting structural weaknesses and the difficult political situation. Accelerating the pace of poverty reduction remains an important challenge. Moreover, Guyana's debt burden remains high, even following debt relief under the HIPC Initiative.

"The authorities' medium-term program, embodied in the Poverty Reduction Strategy Paper (PRSP), seeks to address these challenges on the basis of prudent macroeconomic policies, including sustained tax reform, the introduction of a value-added tax in 2006, careful wage policies, adherence to strict limits on external debt, and prudent monetary and exchange rate policies.

"Sustained structural reform remains key to promoting private sector development, diversifying the economy, and achieving the poverty reduction and growth objectives of Guyana's PRSP. The 2004-05 agenda focuses on continuous restructuring in the state-owned sugar and bauxite companies, and strengthening the regulatory framework of the domestic banking system. In addition, budgetary procedures will be further improved, and social spending better monitored and targeted.

"To improve the quality and efficiency of public spending and safeguard debt sustainability, the authorities plan to establish a five-year rolling Public Sector Investment Program, to conduct feasibility studies for all large projects, and to strengthen procurement procedures. In this context, the authorities have committed to keep the planned construction of a sports stadium within the program's fiscal, debt, and social spending targets, and to take compensatory measures, if necessary, on the basis of a feasibility study.

"Going forward, strong efforts to safeguard debt sustainability and steadfast implementation of macroeconomic and structural policies in line with the PRSP will provide a solid basis for sustained progress toward poverty reduction," Mr. Kato said.